Economics, 3rd Edition

purchasing power parity 

a theory of exchange rates 

whereby a unit of any given currency should be able to buy the 

same quantity of goods in all countries

quantity demanded 

the amount of a good that buyers are 

willing and able to purchase at different prices

quantity equation 

the equation M

× V = P × Y, which 

relates the quantity of money, the velocity of money, and the 

currency value of the economy’s output of goods and services

quantity supplied 

the amount of a good that sellers are willing 

and able to sell at different prices

quantity theory of money 

a theory asserting that the 

quantity of money available determines the price level and that 

the growth rate in the quantity of money available determines 

the inflation rate

random walk 

the path of a variable whose changes are 

impossible to predict